Bob Diamond Steps Down Over Barclays Scandal

Bob Diamond, the chief executive of Barclays Bank, stepped down Tuesday over an interest rate-rigging scandal that threatens financial institutions around the globe.

Allister Heath, editor of the London business newspaper City A.M., tells host Aaron Schachter that in addition to Barclays, several as yet un-named financial institutions colluded to manipulate the inter-bank lending rate.

“There’s a mass problem here at the heart of the financial establishment because all of these banks allowed, or failed to control some of their traders who manipulated interest rates,” says Heath. “In the case of Barclays, they manipulated interest rates for financial gain. And they also manipulated interest rates to try and make themselves look safer and sounder.”

Heath predicts that Diamond’s testimony on Wednesday before a parliamentary committee will supply vivid political theater.

“This is going to be the most spectacular bust-up and confrontation between politicians and businessmen that we’ve seen for a very long time,” Heath says.

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Aaron Schachter: I’m Aaron Schachter. This is The World. The chief executive of Barclays Bank, one of Britain’s biggest companies, abruptly stepped down today. Bob Diamond’s resignation comes less than a week after Barclays paid a $450 million fine. The penalty was imposed by regulators after Barclays was found to have illegally manipulated interbank lending rates. Today Barclays tried to blame the manipulation on a misunderstanding between its executives and the Bank of England. Tomorrow Diamond will be asked about that by a Parliamentary committee. Over the years Bob Diamond hasn’t kept his big salary, big bonus, and big ego under wraps. His brash attitude seem to reflect the values Barclays itself celebrated in this 12-year-old ad featuring actor Anthony Hopkins.

[ad plays]

Anthony Hopkins: I get up in the morning I want a big breakfast. I want my girlfriend saying, “Good morning, big boy.” To which I reply, “I got a big date today. Big meeting with the big cheese from that big studio. It’s the big time with the big bucks.” And she would turn to me, rolling her big blue eyes, and say, “Big head.”

Schachter: Alastair Heath is the editor of the big London business paper City A.M. Alastair, as we heard in that somewhat dated ad, Barclays Bank touted “big” as it’s key brand value and chief executive Bob Diamond was perhaps Mr. Big. Remind us of who Bob Diamond is, if you would.

Alastair Heath: Bod Diamond is a very interesting figure, very interesting character for someone who was the chief executive of Barclays, one of Britain’s oldest and most famous banks. He’s American. He’s self-made. He’s an academic originally. He’s got a Phd, and he decided to go into banking. He climbed all the way to the top and became one of the world’s most powerful and most successful investment bankers hoping to build Barclays Capital–the investment banking division of Barclays–into one of the most successful in the world. He famously masterminded the acquisition in America of Lehman Brothers US operations after Lehman Brothers went bust. Bob Diamond transformed its culture, made it much more buccaneering, much more entrepreneurial. A lot of his value are what Brits and Europeans see as typically American values. He’s well [xx]. He was very dedicated, very driven, and wanted to win and defeat the competition.

Schachter: Is it possible that Mr. Diamond and Barclays Bank got a bit too big?

Heath: To me it’s not a size question. There was a terrible disastrous and scandalous rigging of one of the key interest rates set in London. Something called libel. It’s the rate at which banks lend money to each other and millions of contracts all over the world are based on that rate. It’s very important measure all over the world for the financial markets. It’s now emerged that Barclays, as well as a number of other banks from all over the world, were engaged in rigging the price of that interest rate. Barclays was the first to settle with the US and UK authorities to settle last week and pay a large fine. That’s what’s precipitated Bob Diamond’s resignation as chief executive today. So there’s a massive problem here at the heart of the financial establishment because all of these banks allowed, or failed to control, some of their traders who manipulated interest rates. In the case of Barclays they manipulated interest rates for financial gain, and they also manipulated interest rates to try and make themselves look safer and sounder. Here in the UK this is turning into a major scandal which is much larger than merely a scandal about one bank, but is a scandal that is starting to affect large parts of the establishment, including central bank, the regulators, and the government.

Schachter: Alastair Heath, there’ll be a hearing tomorrow in Parliament with the treasury committee. Mr. Diamond will be there. He is one of the UK’s highest-paid executives and, as you say, an American. I wonder if that will create quite a conflagration tomorrow.

Heath: It will. To me, this is going to be the most spectacular bust up and confrontation between politicians and business leaders that we’ve seen for a very long time, if ever. It’s going to be even bigger, probably, in terms of political theater than the recent confrontations between MPs and Rupert Murdoch and his son James Murdoch

Schachter: That’s a pretty big deal. That’s a big thing to say.

Heath: It’s a very big deal and a very big thing to say. This is explosive. It involves clear breaches of the rules. Bob Diamond’s a much more abrasive character. And it’s going to be fascinating to see what happens.

Schachter: The financial mess in 2008 went back and forth across the Atlantic. Is this a scandal that will touch on the United States or other countries as well?

Heath: Probably, because banks and several other countries are undoubtedly involved in this, and ultimately, it’s only because of American pressure and investigations that this scandal was actually prosecuted in the end. I suspect that had the Americans not stepped in, no one would have done anything about this. So clearly this is very much also an American issue.

Schachter: Allistair Heath is the editor of the London business newspaper City A.M. Allistair, thanks for joining us.

Heath: Thank you.

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